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Health Insurance Innovations, Inc. Reports Second Quarter 2015 Results

Health Insurance Innovations, Inc. announced financial results for the second quarter ended June 30, 2015. 

Second Quarter 2015 Consolidated Financial Highlights

  • Revenue was $22.7 million, an increase of 8.6% over $20.9 million in the second quarter of 2014.
  • Total collections from customers, which our industry refers to as premium equivalents, was $38.5 million, an increase of 3.5% over $37.2 million in the second quarter of 2014.
  • Adjusted EPS was $0.08, compared to $0.09 in the second quarter of 2014. EPS per diluted share was a net loss of $0.04, compared to net income of $0.05 in the second quarter of 2014.
  • Adjusted EBITDA was $1.8 million, compared to $2.1 million in the second quarter of 2014.
  • Record policies in force as of June 30, 2015, totaled 113,000, a 14.1% increase from 99,000 as of June 30, 2014.

"By the end of the second quarter 2015, our sales were in line with our growth expectations, and we expect this trend to continue for the remainder of 2015. Our overall sales results for the quarter reflect the adverse impact of the government's annual enrollment period and the one-time special tax enrollment period for ACA plans, which ended on April 30th. We now have better knowledge and data of sales trends during the open enrollment period that will reflect in future forecasts. In addition, the next ACA open enrollment period is expected to be 90 days shorter, and we expect additional growth as a result. I am pleased with the investments and progress that HII is making in building the leading innovative, consumer- and technology-centric platform in the affordable individual health insurance market," said Michael Kosloske, HII's Chief Executive Officer.

Pat McNamee, HII's President, commented, "I am excited by the opportunities available to HII to meaningfully penetrate the large market for affordable health insurance products. Since my joining the company two months ago, we have been rebuilding the team at HII to support our growth strategies with a focus on core execution, distribution and product expansion. In the second quarter, we have already expanded and diversified our distribution network, adding two new key components including a brokerage distribution network and a new direct-to-consumer network, AgileHealthInsurance.com. We now have four distinct channels of distribution: owned call centers, non-owned call centers, brokerages, and online direct-to-consumer via AgileHealthInsurance.com."

Mr. McNamee continued, "We are setting the stage for 2016 by layering new opportunities over our core business, including AgileHealthInsurance.com, our brokerage distribution channel, new and expanded products, and leveraging our technology solutions to meet the consumer needs of the vast and growing base of customers in need of affordable health insurance alternatives. We believe we are making the right investments at the right time for the long-term benefits of all our stakeholders – our shareholders, partners, employees and customers."

2015 Full Year Guidance

For the full year 2015 we expect revenue between $97 million - $103 million and adjusted earnings per share between $0.18 - $0.25.

Second Quarter Financial Discussion

During the second quarter of 2015, we changed the structure of our operating segments to a single reportable segment. HealthPocket is no longer a separate reportable segment. We believe one segment is more appropriate as a result of our anticipated internal fulfillment of HealthPocket's client referral leads by HII's owned call centers and the launch of AgileHealthInsurance.com.

Second quarter revenues of $22.7 million and premium equivalents of $38.5 million increased by 8.6% and 3.5%, respectively, as compared to the second quarter of 2014. The increases were primarily due to the increase in the total number of policies in force as a result of our continuing expansion of our distribution network and continued success in providing quality ancillary insurance products as supplements to our individual and family plans ("IFP"). We have consolidated short term medical and hospital indemnity policies which have a similar financial profile as IFP. Going forward we will report two categories: IFP and ancillary products. By policy type, the 2015 second quarter mix of revenues was as follows: 71% IFP and 29% ancillary products. A reconciliation of premium equivalents to revenues for the three and six months ended June 30, 2015 and 2014 is in the financial supplement included in this press release.

Adjusted gross margin, which is calculated starting with revenues and then adjusted for third party commissions, and credit card and ACH fees, increased to $11.0 million or 28.6% of premium equivalents for the second quarter of 2015, compared to $10.1 million of adjusted gross margin and 27.2% of premium equivalents in the same period in 2014. A reconciliation of premium equivalents to revenues and adjusted gross margin for the three and six months ended June 30, 2015 and 2014 is included within this press release.

Selling, general and administrative ("SG&A") expenses were $10.4 million in the second quarter of 2015, compared to $8.6 million in 2014. The increase in SG&A expense was primarily driven by the impact of acquisitions and investments in innovations to drive sustainable growth in 2015 and beyond, as well as restructuring costs in our continued effort to control future SG&A costs.

EBITDA was $0.6 million in the second quarter of 2015, compared to $1.6 million in the same period in 2014. Adjusted EBITDA is calculated starting with EBITDA, which is then further adjusted for items that are not part of regular operating activities, including acquisition costs and other non-cash items such as stock-based compensation. Adjusted EBITDA was $1.8 million in the second quarter of 2015, compared to $2.1 million in the same period in 2014. A reconciliation of net (loss) income to EBITDA and adjusted EBITDA for the three and six months ended June 30, 2015 and 2014 is included within this press release.

Cash and short term investments totaled $8.8 million at the end of the second quarter of 2015, and the Company has no debt. Cash decreased by $1.7 million during the quarter primarily due to a $2.0 million increase in advanced commissions that we provide to our distributors. As of the end of the second quarter of 2015, our advance commissions totaled $10.0 million.

 

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